Dec 8, 2018

Cory Diary : Does NAV really Matters in Dividend Investing ?

Often I hear people uses NAV to gauge investment merits. Is a good metric but should never be the only imo. This is based on my personal experience and logic. NAV is only meaningful if the underlying assets is not as productive as we think it should be and the valuation of the company is rather complicated to understand.

In dividend investing, especially reits, the business typically is the property income and the DPU. There aren't rocket science needed. Many reits today publish investor reports. We have good enough information. Ofcourse is still skew towards what Management like us to see. Who doesn't ? That doesn't mean we can condone.

If a company is returning 5% yield consistently. Does it matters to us if the Price/NAV is 1.3 or even 1.5 as an academic question ? The question in my mind will be sustainability of the dividends. The MOS of it's properties. The quality of the earning. The valuation of it's properties. This may explains why the high Price/NAV.

Now, with recent volatility of the market. If the yield of such asset shoots from 5% to 6%. Will you buy ? If the yield expects to drop from 5% to 3%, will I sell ? That depends due to price or reduced DPU. More a fundamental question. Recently I sold 25% of CMT due to price. My fear of losing out stable future dividends creeps in though just a little , 5% yield is not something i could find easily with similar alternative. This is clearly a capital gain trade with re-balance in mind. One could have said I still have 75% but that's not the point. The constant search for quality diversification is always there. Always on the move.



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